A magazine’s frequency schedule is inexorably tied to market conditions. Costs associated with adding frequencies are generally fixed;postage, paper, staff additions;but without the support of a stable advertising base, a frequency increase executed too rapidly will implode under the weight of its own production costs. Careful attention to the market;is it shrinking or expanding?;and patterns in your advertisers’ schedules will help you determine a frequency strategy that optimizes your revenue opportunity.
Prevailing Market Conditions
Richard Reiff, president of b-to-b publisher Cygnus Publishing , explains a universal truth: “We have to understand the market and the dynamics of it. You always have an audience that has a need for the information but if you don’t have the advertisers that want to reach that audience, it doesn’t make any difference.”
Reiff’s comment forms the bedrock of a competent frequency strategy. While subscriber revenue and, for some titles, single-copy sales, account for a portion of new revenue from a boosted schedule, advertisers are generally providing the lion’s share of revenue. In fact, a minority of full-run regulars are usually counted on to support the added costs associated with extra issues. A healthy market, therefore, with a vendor base anxious to get their brands in front of readers, makes a strong case for adding an issue or two to the schedule.
For Rich Lucibella, publisher of 14,000-circ S.W.A.T ., a title for paramilitary enthusiasts based in Ocean Ridge, Florida, the decision to extend frequency another three issues to monthly was an easy one. “We finally started making money. It’s as simple as that,” he says. Originally hemorrhaging $30,000 per issue when he bought the magazine from Larry Flynt in 2001, Lucibella brought it back under control by fall 2003. With the magazine stabilized, Lucibella discovered that advertising was beginning to pressure editorial, a sign that he initially thought meant either a frequency change or an extra signature. “Out of a 100-page book we try to have no less than 58 pages for editorial,” he says. “When I saw advertising start to push on the editorial I thought I had a couple of choices. Raise the rates or go to a 116-page book.”
Lucibella raised his rates 10 percent in 2004 but the demand continued. He reexamined his choices and decided a frequency change was the best way to go. “If I raised the book to 116 pages, I still haven’t stepped up in advertising quite enough to cover what it would cost me, so I’d actually be taking a profit step backwards,” he says, “so I figured ﾑokay, we’re making money. Let’s go to 12 times a year.'”
According to Lucibella, the extra signature would have cost another $12,000 per issue due to added shipping and printing expenses. With a competitively priced ratecard;$1,100 full-page net;he figured the gap would be too great to depend on advertising. “We’d have to fill a minimum of 45-50 percent of those pages with advertising.”
According to Lucibella, since S.W.A.T. went monthly, ad demand has kept up and he says that if the pace continues for several more issues he’ll end up going to the 116-page folio anyway.
Lucibella’s decision to move beyond rate increases was smart. “I think this is where a lot of publishers get into trouble,” says Rob Dorfmeyer, Penton Media design and engineering group publisher. “They say, ﾑHell, I’m going to take my rates up 10 percent this year and 12 percent next year,’ and they price themselves out of the niche. This decision, even when considered cautiously, can destroy a franchise property in a very short period of time.”
“I think the decision to grow frequency at the competitive yield-per-page allows for a bigger growth opportunity than maintaining a lower frequency and continuing to push a net per page increase,” adds Dorfmeyer.
The four-year-old Medical Design , a 42,500-circ title in Dorfmeyer’s group, will be increasing its frequency by two issues, to 10 times, in 2006. Critical in this decision was vendor support. “When you look at your ad base;the number of manufacturers, not number of pages,” says Dorfmeyer, “a pretty strong minority of them have to be able to support the frequency expansion.”
In Medical Design’s case, he expects about 15 to 20 full-run advertisers will be adjusting their frequencies along with the magazine. In fact, one of the indicators that pointed to increasing frequency was a growth in the number of advertisers who were looking for additional frequency that an eight-time schedule couldn’t handle. Big-picture economics, however, point to a vibrant market, which has given the magazine a 53-percent ad page increase over 2004, and Dorfmeyer expects another 20 percent increase on top of that for 2006.
Editorially speaking, adds Louise Clemens, Medical Design’s national sales manager, “adding two issues allows us more editorial coverage of different topics that we haven’t been able to cover.”
The folio is anticipated to hold steady at a 90-page per issue average.
While frequency strategies hinge on vendor buy-in, a passive, wait-and-see attitude is not enough. An ear to the ground and close contact with your vendor customers will produce better results. Mary Murko, publisher of Best Life, a Men’s Health spinoff, has kept her advertisers in the loop since the magazine’s launch in spring 2004. Two newsstand-only test issues in 2003 produced an average of 130,000 single copy sales at a $4.99 cover price, triggering a green light for Murko to move into launch mode. At that point, advertisers were kept apprised of her plan to get to a 10-time schedule by 2006;a jump from its current seven-time schedule. “We’ve been saying from the beginning that we plan to go to 10 times in 2006,” she says. “We’ve had very little attrition. But it’s been very targeted growth, in terms of the types of advertisers we go after.”
The Case for Reduction
If your market begins to disintegrate beneath you it might be time to consider reducing frequency. “In a consolidated or flat industry, the need for information doesn’t go away,” says Cygnus’ Reiff. “In fact, it could increase.” According to Reiff, a magazine can maintain a strong economic model at a reduced frequency, with one caveat: “It’s very tough to reduce frequency when you’re not in the lead position. Otherwise it’s perceived as a weakness in the marketplace.”
The trigger points for reducing frequency are the exact opposite of those that indicate increased frequency. In this case, as the market consolidates, full-run advertisers may begin to nibble down their schedules from, say, 12 to 10 or even nine. “Do the spreadsheet and look at how many people are taking advantage of your full frequency and if that number is small and dropping you better start to look at it,” says Reiff.
The trick here, as long as it’s not a knee-jerk reaction to a temporary downturn, is to bring frequency in line with advertisers’ reduced-but-still-existent marketing efforts. “Economically, you want the magazine to stay alive. The readership may have more need for information as times get tougher. You’re better off if you bring the frequency down and continue to deliver a good information package,” says Reiff.
Just as you would when increasing frequency, getting out into the market and making sure key advertisers are on the bus is critical. “The argument there is they’re backing down and spending less in the market because they’re spending more in all the other sectors that they’re competing in. So if you back off [the magazine] to, say, nine times they can be in every issue again, and that’s a strong selling point,” says Reiff.
A bonus to this strategy, says Reiff, is the lower frequency may also encourage advertisers with traditionally smaller schedules to graduate to a full run in the reduced frequency. “The people who were at six insertions could suddenly see their way clear to get to nine,” he says. In Reiff’s experience, frequency reductions in some cases actually increase revenue. “We would put it all on a grid to see how many full frequencies we had;how many nines and sixes, whatever. We looked at the fractionals in the same way, and built a model that said as we bring frequency down closer to them, can we build a case for them, taking advantage of frequency rate breaks, to move toward full frequency? And that happens.”
Changes to Cost Structure
When it comes to increasing frequency, Penton’s Dorfmeyer says not all things are equal when considering how a frequency increase affects cost structure. “The expense structure of our business is not directly proportional,” he says. “While any publisher will have the direct expense associated with frequency expansion;manufacturing costs, commission expenses, and possibly additional editorial headcount;most of the additional revenue expansion will fall through to EBITDA at a higher rate than your current per-issue basis, assuming that the average folio and revenue remain approximately the same for each expansion increment.”
So, according to Dorfmeyer, while variable costs go up, fixed costs don’t;allowing the publisher to manage an expansion and potentially enjoy a “much higher fall-through on the EBITDA end of the P&L statement.”
In a vibrant market and with the right pieces in place, a magazine’s success can lead to a thick folio. Not so much a concern in the consumer markets perhaps;just take a look at September’s four-pound, 800-page, $82 million Vogue;but a big folio in the b-to-b world could lead to trouble. Readers are unlikely to soak in the tub with a copy of Industrial Machinery Digest. Increasing frequency has the adjunct benefit of spreading out the wealth. “There is a point where you increase frequency to control readership,” says Reiff. “If it’s a thumper, the publisher may be saying ﾑWhoa, look at this cash cow.’ But the advertiser starts to wonder if they’re still visible and the reader starts to think they just don’t have that kind of time.”
As for the competition, S.W.A.T.’s Lucibella notes that more of a good thing can only increase his value proposition. “Our hype, if you will, is we’re giving you more value for your advertising dollars, more value for your subscription dollars. So we’re going to give you a much better book than the competition.”
Dorfmeyer puts it this way: “Consider the editorial coverage that a higher-frequency book can offer, versus competition on the relatively same folio size. The edit pages can be two or three to one. What do you think the reader’s or manufacturer’s preference would be? I think it’s conservative to say that the more in-depth will win out in both schools of thought, considering that the edit is relatively comparable and credible.”
In the end, says Dorfmeyer, whether a situation calls for a reduction or increase in frequency, the flash points are universal. “They include a break-even analysis, current and near-term market conditions, niche served, strength of editorial product, sales staff talent, and the increasing or decreasing awareness of your brand in the marketplace,” he says.